Des Moine-based Dwolla is a cash-based payment network that provides real-time, online and mobile payments, charging a flat 25 cent fee on any transaction over $10.

Iowa governor Terry Branstad and lieutenant governor Kim Reynolds say that they plan to see how they can use Dwolla's system throughout the state for things such as the collection of property taxes, issuance of refunds, vehicle registration and payment of government contractors.

In a first step, businesses that already pay more than $100 million in cigarette stamp taxes now have the option of paying via Dwolla. This is cheaper and safer than mailing and processing a paper cheque while the speed of the system also allows businesses to receive their tax stamps quicker, argues the firm.

Says Branstad: "This new method is an efficient, effective means of payment for Iowa taxpayers, and I look forward to expanding this service into additional areas within state government."

Ben Milne, CEO, Dwolla, adds: "The number of state and federal payments are in the billions with transactions totalling in the trillions, meaning even a fraction of savings could have a profound effect on the economy. This partnership is about creating a more sustainable, responsive, and convenient business climate for the state and its taxpayers, both today and tomorrow."